New announcements out of the White House suggest that the newly-elected president will seek to undo consumer protections put into place after the 2008 global recession. The Dodd-Frank Act is evidently under review. This particular challenge is directed at the Consumer Financial Protection Bureau, and it’s director, Richard Cordray.
Financial industry insiders have chafed at the power given to the CFPB to oversee, require change, and fine companies who violate the law. The CFPB has a great deal of independence because it is funded by the Federal Reserve rather than Congress. The CFPB has enacted consumer safeguards in an industry rife with illegal and insider deals. The new Secretary of the Treasury , Steven Mnuchin, said during confirmation hearings that he thought the CFPB should remain, but be placed under the control of Congress. President Trump has said that Dodd-Frank’s creation of new agencies is unconstitutional (referring to the CFPB).
One of President Obama’s financial protections, called the Fiduciary Rule, was due to take effect in April but its implementation has been halted. The rule required retirement advisors to act in the best financial interest of their clients, rather than steering them into high risk investment products with higher fees for the brokers. Some large brokerage firms, such as Morgan Stanley, are moving ahead with putting internal protections for retiree investors in place ahead of the implementation.
Trump claims to be removing regulatory burdens from the financial sector, with the idea of opening trade and investment. Regulatory burdens to one industry are consumer financial protections to the population as a whole. Trump, speaking to a group of small business owners last week, said he is going to “do a number” on Dodd-Frank.